Trial begins for Seven Falls developer accused of fraud

Published: Tuesday, October 8, 2013 at 6:30 a.m.

Last Modified: Monday, October 7, 2013 at 10:23 p.m.

As one attorney painted him a schemer and another a victim, embattled Seven Falls developer Keith Vinson turned to face a jury Monday during the first day of his federal trial, forecasted to stretch into two to three weeks.

In opening statements, the prosecution accused Vinson of defrauding banks in investment schemes employed to “forestall the failure” of his dream of a top-notch golf course community in Henderson County. The schemes, they said, waylaid two banks, killed another development's completion and left Seven Falls lot owners with resell nightmares.

Vinson's attorney, J. Clark Fischer, said that unlike what the prosecutors describe as a “very tangled web of conspiracy and fraud,” the jury will not see evidence of a grand conspiracy. He said they will see that his client fell prey to bad business decisions and “really bad banking decisions” that mixed with a failing economy to become a recipe for disaster.

Ten of Vinson's co-defendants have pleaded guilty to lesser counts, and some have agreed to testify against Vinson, who has been portrayed as the “heart of the conspiracy” and now stands alone for trial. Vinson faces 13 counts — a reduction from last year's indictment of 48 charges — in a second superseding bill of indictment filed Oct. 1 to streamline the trial.

The new bill charges him with bank fraud conspiracy, conspiracy to defraud the United States, misapplication of bank funds, wire fraud, money laundering and money laundering conspiracy.

From dream to 'scheme'

Vinson's vision of a 1,400-acre resort community filled with luxury homes, beautiful vistas and waterfalls in a gated complex with an Arnold Palmer-approved championship golf course was plagued by hardships, but started grand.

Real estate was hot in December 2006 and in 2007, when Vinson set out to round up seed money and start his development, according to Fischer.

To get the ball rolling, prosecutors say he borrowed about $25 million from the National Bank of South Carolina and purchased the land.

In May 2007, Vinson held a Founder's Day celebration, which welcomed people with deep purses from all over, Fischer said. Seven Falls “started out with huge success.”

Performers Kenny G and The Blues Brothers and golf legend Arnold Palmer topped the guest list, according to prosecutors. The event kicked off a flurry of excitement for the project, in which an initial 90 lots were sold for an average price of about $391,000 per lot.

The lots were valued at $200,000 to $800,000, with luxury amenities on site, including a retail village, assistant attorney for the federal government Mike Savage said in his opening statement. “It was to be a playground for the rich... (but) at the end of the day, it wasn't to be.”

Initial investments were needed to secure the land, then to pay contractors to work on the site. As more properties were developed, the goal was for more plots to be sold to pay off the investments, according to prosecutors.

But they “couldn't sell enough lots,” Savage said. “They ran out of money in 2008” and by April, Seven Falls needed “just a little bit of money to get them over the hump” and into the normally busy summer months of real estate.

“Without the influx of additional capital from ongoing lot sales, Vinson and his partners were unable to pay their subcontractors on time and were at risk of defaulting on their loans to the National Bank of South Carolina, thereby putting the entire project at risk of foreclosure,” according to the Oct. 1 indictment.

Savage said the defendants decided to “sell lots to each other” in a “lot loan scheme” aimed at keeping the development from going under, using false representations and “misleading appraisal reports” that inflated the values of lots.

“Although the lot loan program scheme secured over $10 million, it was not enough to rescue the Seven Falls project and the conspirators' investments,” according to the latest indictment.

Fischer said they believed, like so many others before the real estate bubble burst, that real estate “always goes up.”

Recipe for disaster

Fischer said “things were looking good” in 2007, with lots being cleared for development and roads being built, but then — as normal in the mountains — sales started to slack as the winter set in.

Vinson held another marketing event for the development in 2008, and then “all of a sudden credit is drying up,” Fischer said. “When credit dries up, you can't sell.”

He said Vinson never gave up on the project, traveling around the country in search of investors to keep the project going. He thought he found the group he needed in a town outside of Atlanta, Ga., he added. A group Fischer referred to as U.S. Capital Funding agreed to funnel $75 million into the development to see Seven Falls through completion for a commitment fee of $1.3 million from Vinson.

Prosecutors say he secured that fee by commandeering another project.

Vinson acquired the incomplete Queens Gap development in Rutherford County in 2009. “Like Seven Falls, Queens Gap was experiencing sales difficulties that in turn threatened the completion of the project,” according to the indictment. “Vinson agreed to oversee the completion of Queens Gap's infrastructure in exchange for an ownership interest in the project.”

Vinson and the Queens Gap developer created a joint account of $4.25 million to be used for the project under the direction that any withdrawals from the account bear the signatures and approval of both developers, according to the indictment.

“Despite this agreement, on or about July 9, 2009, Vinson executed a new signature card for the Queens Gap account,” removing Queen's Gap's original developer from the deal with the help of former Bank of Asheville President Buddy Greenwood.

Court records allege Vinson used that money to pay the commitment fee, but Fischer said the $75 million never came.

Work officially halted at Seven Falls in 2010. The completion of Queens Gap had failed, but Fischer contends there was no fraud on Vinson's part. He hinted his client was merely following the advice of attorneys, investors and bankers who made bad decisions.

“He did not ask any banker to do this for him,” he said. “There is no evidence that Keith Vinson had anything to do with it.”

<p>As one attorney painted him a schemer and another a victim, embattled Seven Falls developer Keith Vinson turned to face a jury Monday during the first day of his federal trial, forecasted to stretch into two to three weeks. </p><p>In opening statements, the prosecution accused Vinson of defrauding banks in investment schemes employed to “forestall the failure” of his dream of a top-notch golf course community in Henderson County. The schemes, they said, waylaid two banks, killed another development's completion and left Seven Falls lot owners with resell nightmares.</p><p>Vinson's attorney, J. Clark Fischer, said that unlike what the prosecutors describe as a “very tangled web of conspiracy and fraud,” the jury will not see evidence of a grand conspiracy. He said they will see that his client fell prey to bad business decisions and “really bad banking decisions” that mixed with a failing economy to become a recipe for disaster.</p><p>Ten of Vinson's co-defendants have pleaded guilty to lesser counts, and some have agreed to testify against Vinson, who has been portrayed as the “heart of the conspiracy” and now stands alone for trial. Vinson faces 13 counts — a reduction from last year's indictment of 48 charges — in a second superseding bill of indictment filed Oct. 1 to streamline the trial.</p><p>The new bill charges him with bank fraud conspiracy, conspiracy to defraud the United States, misapplication of bank funds, wire fraud, money laundering and money laundering conspiracy.</p><p><b>From dream to 'scheme'</b></p><p>Vinson's vision of a 1,400-acre resort community filled with luxury homes, beautiful vistas and waterfalls in a gated complex with an Arnold Palmer-approved championship golf course was plagued by hardships, but started grand.</p><p>Real estate was hot in December 2006 and in 2007, when Vinson set out to round up seed money and start his development, according to Fischer.</p><p>To get the ball rolling, prosecutors say he borrowed about $25 million from the National Bank of South Carolina and purchased the land.</p><p>In May 2007, Vinson held a Founder's Day celebration, which welcomed people with deep purses from all over, Fischer said. Seven Falls “started out with huge success.”</p><p>Performers Kenny G and The Blues Brothers and golf legend Arnold Palmer topped the guest list, according to prosecutors. The event kicked off a flurry of excitement for the project, in which an initial 90 lots were sold for an average price of about $391,000 per lot.</p><p>The lots were valued at $200,000 to $800,000, with luxury amenities on site, including a retail village, assistant attorney for the federal government Mike Savage said in his opening statement. “It was to be a playground for the rich... (but) at the end of the day, it wasn't to be.”</p><p>Initial investments were needed to secure the land, then to pay contractors to work on the site. As more properties were developed, the goal was for more plots to be sold to pay off the investments, according to prosecutors.</p><p>But they “couldn't sell enough lots,” Savage said. “They ran out of money in 2008” and by April, Seven Falls needed “just a little bit of money to get them over the hump” and into the normally busy summer months of real estate.</p><p>“Without the influx of additional capital from ongoing lot sales, Vinson and his partners were unable to pay their subcontractors on time and were at risk of defaulting on their loans to the National Bank of South Carolina, thereby putting the entire project at risk of foreclosure,” according to the Oct. 1 indictment.</p><p>Savage said the defendants decided to “sell lots to each other” in a “lot loan scheme” aimed at keeping the development from going under, using false representations and “misleading appraisal reports” that inflated the values of lots.</p><p>“Although the lot loan program scheme secured over $10 million, it was not enough to rescue the Seven Falls project and the conspirators' investments,” according to the latest indictment.</p><p>Fischer said they believed, like so many others before the real estate bubble burst, that real estate “always goes up.”</p><p><b>Recipe for disaster</b></p><p>Fischer said “things were looking good” in 2007, with lots being cleared for development and roads being built, but then — as normal in the mountains — sales started to slack as the winter set in. </p><p>Vinson held another marketing event for the development in 2008, and then “all of a sudden credit is drying up,” Fischer said. “When credit dries up, you can't sell.”</p><p>He said Vinson never gave up on the project, traveling around the country in search of investors to keep the project going. He thought he found the group he needed in a town outside of Atlanta, Ga., he added. A group Fischer referred to as U.S. Capital Funding agreed to funnel $75 million into the development to see Seven Falls through completion for a commitment fee of $1.3 million from Vinson.</p><p>Prosecutors say he secured that fee by commandeering another project. </p><p>Vinson acquired the incomplete Queens Gap development in Rutherford County in 2009. “Like Seven Falls, Queens Gap was experiencing sales difficulties that in turn threatened the completion of the project,” according to the indictment. “Vinson agreed to oversee the completion of Queens Gap's infrastructure in exchange for an ownership interest in the project.”</p><p>Vinson and the Queens Gap developer created a joint account of $4.25 million to be used for the project under the direction that any withdrawals from the account bear the signatures and approval of both developers, according to the indictment. </p><p>“Despite this agreement, on or about July 9, 2009, Vinson executed a new signature card for the Queens Gap account,” removing Queen's Gap's original developer from the deal with the help of former Bank of Asheville President Buddy Greenwood.</p><p>Court records allege Vinson used that money to pay the commitment fee, but Fischer said the $75 million never came.</p><p>Work officially halted at Seven Falls in 2010. The completion of Queens Gap had failed, but Fischer contends there was no fraud on Vinson's part. He hinted his client was merely following the advice of attorneys, investors and bankers who made bad decisions.</p><p>“He did not ask any banker to do this for him,” he said. “There is no evidence that Keith Vinson had anything to do with it.”</p><p>The trial continues today with witnesses called by the prosecution. </p><p>Reach Weaver at emily.weaver@blueridgenow.com or 828-694-7867.</p>